title: Peer group ties and executive compensation networks.
abstract: Publicly traded firms in the US typically determine C.E.O. compensation by benchmarking the pay of their C.E.O.s against the pay of C.E.O.s in "peer" firms. Consequently, executive compensation is influenced not only by firm-level characteristics, but also by the selection and actions of the firm's immediate peers as well as by the structure of the executive compensation network overall. Analyzing compensation peer group choices made by the same 1183 firms for F.Y. 2007, 2008 and 2009, we find that while the typical compensation peer is similar in size and industry to the firm that chose it, deviations from this norm are common, especially among larger firms, and tend to be towards larger firms with better paid CEOs. Further analysis shows that firms who pay CEOs well relative to the pay that would be predicted from their revenues, return on assets, and industry tend to have greater aspiration bias in their group of named peers.
authors.affiliation: School of Social and Family Dynamics, Arizona State University, United States.
authors.forename: Matthew
authors.initials: M
authors.lastname: Pittinsky
authors.forename: Thomas A
authors.initials: TA
authors.lastname: Diprete
keywords: Elites; Executive compensation; Inequality; Labor markets; Networks